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rock climbing in the middle of brooklyn? today we meet three fraternity brothers turned entrepreneurs who turned their passion for rock climbing into a booming business. that's up next on "your business."
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hi there, everyone. welcome to "your business" where we give you tips and advice to help your business grow. with the year half over, 2010 is shaping up as a mixed bag for small business owners. and recently released statistics leave a lot of question marks about the future. last week the commerce department reported that consumers have cut spending. retail sales dropped 5% in june and the national federation of independent businesses monthly survey of small business owners shows optimism was down last month. this comes as the senate wrangles over president obama's proposed legislation for small business tax breaks and a $30 billion in expanded government lending. our guest says the banks have the money to lend but aren't
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because lack of sales is making small business unworthy of cred credit. also with us todd mccracken president of the national small business association. great to see both of you. >> great to be here. >> bill, i want to start with you because there has been this debate going on in washington whether to pass this $30 billion lending program. i'm assuming you think there is no need for it. you say the banks already have the money. >> i think they do. i'm the chairman of the board of a small bank that services small businesses in new jersey and we just want some good applicants to come in the door. we'd like to make loans. and it's getting a little bit better month to month. we're getting some. but if you look at the whole banking system loaded with money to lend but if you look at the small business owners, you know, they don't have a reason to lend. i'll just give you one simple example. small businesses really dominate the construction market. housing starts are a million below, a million units below where they usually are, and that would mean a million applications for construction loans don't happen and because these firms are sitting on the sideline waiting for a customer who will buy the house.
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that's basically what we're seeing is loaned demand is really low right now. >> todd, we've been talking about credit, credit, hard to get for the past year. >> right. >> bill is saying, you know, now it's not that the money is not there but that good borrowers aren't there. you seeing the same thing? >> well, sort of. as i look at it from a little bit different perspective, though, clearly demand is not what it would be if we were having a really robust economic upturn. but we also see pockets where there is a real problem out there. the independent bankers tell us that more than a thousand of their members have reached their loan limits, capital requirements, and can't make new loans. a lot of other banks are being told by the examiners that they're over leveraged in certain markets. when a small business goes out they don't have this data. all they know is they got turned down for the loan. >> do you think we're on a slippery slope back down? your survey showed optimism down. do you think that might change in the next couple months or do you think we'll just head down?
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>> i'd like to see it changed. unfortunately a lot of things happening in washington don't give us a lot of confidence. looking at the percent of our owners who say it's not a good time to expand because of the political environment, you know, it's four times where it was in 2000 for example so that's a major concern for small businesses and uncertainty means you don't commit your money until you know what kind of an environment you're going to be in. so that's holding back. capital spending is at 35-year lows on our survey. we have more firms planning to cut inventories than add. would be nice if that changed. again, it all comes around to the top problem for them which is no customers so consumer spending is weak and until we get the consumer excited i think we'll have very slow growth here. >> i have to say, you know, this is not statistically significant. this is just me talking to some people. and i have gotten a sense that people, their attitude is changing. nobody is jumping up and down right now but there are people out there who are suddenly saying, i see that there may be a light at the end of the tunnel. they're not biting their nails
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every night. todd, do you see that or am i surrounded by a bunch of optimistic people? >> i'd say it's 50/50. i sort of agree with you but not entirely. we're about to release our own mid year economic report and what it shows is that there are more people out there who are expressing optimism. but there are also more people out there expressing pessimism. so if you average them out, optimism really seems to be going up at the end of last year, early in 2010, and at least on average it seems to be leveling off and people maybe on average are getting more pessimistic is what our survey is showing but there is this pocket of people whose optimism has really made a jump. interesting. >> what's interesting is a lot of people i talk to, their complete attitude has changed. they say, now, flat, totally fine. i'm not worried about flat. i just don't want to see it go down anymore whereas in past years they might have thought flat was a terrible thing. thank you so much. we'll continue checking in with you to see what the state of the
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world is out there. >> thanks, j.j. >> thanks a bunch. starting a business with a friend can get complicated. who's going to be the boss? who's going to handle the difficult tasks like firing employees or dealing with unhappy customers? well, we recently spent some time with the three founders of an indoor rock climbing gym in brooklyn. we found out how these three college buddies turned business parters have made the best of what could have been some tricky times. in the old days sports in new york city used to be of the classic variety, but times have changed. this is brooklyn boulders. 20,000 square feet of rock climbing in the heart of the burough. >> it was great that this opened because this is the only place in brooklyn and one of the few places in the entire city. >> the facility, which opened last september, is the work of fraternity brothers turned business partners, jeremy, lance, and steven.
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going into business with your close friends may sound risky but these guys have figured out how to make it work. >> this is the promotion we ran. >> they found that a clear division of responsibilities has helped them tackle the challenges of managing the startup and avoid any personal drama. >> whenever the discussion gets a little fiery, we're always just like, friends first, friends first. >> jeremy and steven, both avid climbers, wrote a business plan for a climbing gym while studying entrepreneurship at college. they went their separate ways after graduation but continued to pursue their idea. >> new york city didn't really have any true climbing gyms. >> we realized that we have all the capabilities, so we figured, why not? let's go for it. >> from the start their roles have been defined. jeremy, who works in finance in boston, came up with the projections and model. and he and steven pitched the idea to their families. >> there's 36 million americans that claim that they climb.
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you know, we can find at least a few thousand in a city of 11 million willing to do it at a price that makes sense. >> they also brought on a third friend from college to round out the team. >> they're like, do you want to be part of this? you have natural skills to run the business. we trust you. and i said, yes, i do, but i want equity. and so that's how i got into the mix. >> lance is the operations guy. he can sell anyone anything. great at sales and marketing and pr. i'm the creative type. i can, you know, design and build. jeremy's the financier so with my vision, jeremy's capabilities, and lance's execution, the roles were just so clearly defined from the very beginning. >> with funding and a management team in place, steven took over the creative responsibilities. he searched around new york city for more than a year before securing a lease on a 100-year-old warehouse in brooklyn that used to house newspaper delivery trucks.
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>> we had to think very creatively. essentially leveraged every resource we had. >> for the average person, the construction project would be close to impossible. but steven had resources at his disposal. for years he had worked in his family's experiential marketing production companies. he sketched the entire layout and contracted with them to build it in stages. he and lance oversaw the project and made sure to maintain an urban look that fit in with the surroundings. >> we were constantly working on every inch of this building. finally when we got to the point where we were adding the texture like the rock surface on the walls we split the team into two. so we had one shift coming in at 4:00 p.m. or 5:00 p.m. and working until 1:00 or 2:00 in the morning. >> now that brooklyn boulders is open for business, lance manages the day-to-day operations while jeremy and steven continue in their roles behind the scenes. >> i'm ready for any job.
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no job is too small for me. seeing all the jobs from all the angles makes me the perfect person to assign those jobs and, you know, make this place run like a well oiled machine. >> i've got a very intimate knowledge of the numbers and that certainly helps you figure out pretty quickly if there is something going wrong or not. >> we want to be known as specialists in what we do. so driving that home, making sure that the real hard core climbers are happy and continue to stay happy and then the trickle down effect, everyone else will hopefully benefit. >> and while they're each focused on their specific responsibilities within the business they all have an eye on the big picture. >> when it comes to what's going to happen over the next five years, you know, the three of us really have -- there is no major decision that will get done without the three of us being on exactly the same page. so what are the potential
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pros and cons of running a business with friends? let's turn to this week's board of directors to ask them. we have a former venture capitalist and a serial entrepreneur who has founded five, six -- different every time i say it. five companies. >> looking older than i am. >> great to be with both of you. i asked if you had started a company with a friend. you both said yes. did it work out? >> not so well. first off these guys show tremendous passion so i love the business, they're having fun, having a good time with it, but things don't always go as smoothly as you think they're going to go. there's usually going to be, in my experience there was a stress point where i wanted to go one direction and my partner wanted a different direction very early on in the business and it really hurt the business. we survived but there were -- i had a lot of lessons learned in going through that experience. >> like? >> well, first you need to have one, clear leader in the business. so these guys, i respect the fact that they want to have all three of them vote together and
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no major decisions made unless all three want to go in that direction. maybe not the best formula. maybe they should have one person that they agree is, if there is a stalemate, that one person is going to make the overriding decision. >> and also, we always say get ready for the divorce at the beginning of the marriage basically. so have a contract? >> yeah. i mean, i think whether you're friends with a person in advance or, you know, it's somebody that you've recruited through another source you still have to be very careful about creating a partnership agreement and figuring out what happens to that person's equity should they need to leave the business early. i think in this case it looks like they have kind of followed, you know, what you're talking about, which is to define roles early on. one seemed to be kind of the cfo. the other one seemed to be a coo and then, you know, the other partner had maybe more of the idea and a ceo visionary role. so they seemed to be executing that advice. >> but a buy/sell agreement. i think they need to sit down and put together a buy/sell
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agreement right now and that means let's value what we think the business is going to be valued at, create a formula based on how the business grows so if somebody wants out or two of the guys want somebody out they've got a way to do that. >> the thing too is you need to think so beyond, so think about if somebody gets married. i mean you can always revisit but if somebody gets married and something happens to that person how does their partner get involved in the business or not? and there are just so many what ifs. >> a lot of unknowns right now. >> that you need to think about and try to account for as many as possible. i did like, though, when it works, it's brilliant. right? >> when it works, it's terrific. there is nothing like going to a place every day that's your job with your buddies. there is nothing like that. >> all right. thanks so much, you guys. twitter. we hear about it all the time. often by people saying it's a great way to help your business. well, we wanted to learn how it can help your business. so we went to twitter con where hundreds of small business owners and some big business owners like martha stewart had a
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tweet up to talk about harnessing the power of twitter. ♪ tweet, tweet, tweet >> from social media gurus to leaders of major companies to small business owners twitter is transforming the way people do business. >> takes the core value proposition of the business and makes it even better because it can notify people right in the moment to a specific place and specific time when to get the best experience. >> we asked for customer testimonials. we can survey folks, ask them what they like or don't like about our service. >> business owners from all over the country gathered at twitter con in new york city. there they learned from experts and from each other how to better leverage social media. >> as a piece of research, it's accurate. it's informative. it's certainly to the point. >> martha stewart shared her advice for connecting customers via twitter. >> look, i think it's really worth trying for any business. you want to be where your customer is so if there is a
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very vibrant environment like twitter why not use it? >> laura fitton, author of "twitter for dummies" shared her best tips for using twitter for your business. >> my four word guide to twitter and any social media platform is listen, learn, care, and serve. right? so dive in and look for key words related to your business, look for things related to your locality, and just provide lots of ideas, lots of questions, lots of content, lots of data around that core problem. and the right people will find you because you'll be helping them. >> and twitter isn't the only way for businesses to connect with customers online. new location based applications like four square can also provide opportunities for entrepreneurs to spread the word about their companies. >> we're allowing people, allowing business owners to engage with the merchants or engage with their customers while actually at their particular business. >> so if a message appears to folks when they check in to say, hey, we have this special going on this week or here's the, you
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know, the recommendations we have from the menu. you can also see what people are saying about your location, as well, and follow up with them, both the good and the bad. >> and small business owners are taking to their computers, smart phones, and i-pads to share and discover what's going on with business right now. >> what people need to realize is twitter enables you to have access to anyone. it's reel b ae's really about t conversation. if you have something interesting to say or want to engage somebody you can talk to people you never could reach before. ♪ tweet, tweet, tweet >> you can also follow us on twitter. find out about the latest small business news and learn more about upcoming segments on the show. it's at msnbc yourbiz. coming up, the topic we get the most mail about -- funding. we'll answer your business questions including one about the best way to obtain a $50,000 loan. and we have a brand new segment. where's the money?
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this week micro loans and how they helped two women from georgia start their cleaning service. [trumpet playing "reveille" throughout]
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reviving the economy means reinventing the way we do business. here's to the owners showing us the way. [trumpet playing "reveille" fades to silence] it is by far the issue we get the most viewer mail about. entrepreneurs are always asking where can i find funding for my small business? well, we heard you. and so this week we're starting a new feature called "where's the money?" we'll be looking at many different funding alternatives to help you grow your business. this week, micro loans. how they work, what you need to do to obtain one, and how it helped two women from georgia reach their entrepreneurial dream.
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♪ >> i wasn't able to go to a bank to get a conventional loan because my credit was so poor. >> i was making no money. i mean, i couldn't buy groceries. i don't even know how i paid for daycare back then. i don't know how. >> as single moms working minimum wage jobs with no business experience lisa and terry's only assets were smarts and determination. >> i thought that maybe i could, you know, do this on my own, be my own boss, and make my own dreams come true. >> when lisa first met us she said what she did was she looked around at all the expensive, beautiful homes being built on the lake in the county that she lives in and said, somebody's got to clean those people's homes. >> i wanted to work for myself, be self-employed, and i had
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heard about grace and ace through a friend of mine. >> we give people that shot they wouldn't have otherwise because they are people that are low income or moderate income but have maybe some problems with their credit or don't have enough collateral. >> when lisa first heard about a micro loan program in her community, she community, she approached her friend, terry, about starting up a business. >> she said, i found this entrepreneur loan that we could apply for and let's try it. i said okay. >> the loan lisa davies found is from ace, appalachian community enterprises, a community-based nonprofit micro loan organization set up to help people who traditional banks won't. >> we don't just look at the credit score, we look at what's gone on with the person. >> grace and her team do more than just make loans.
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>> you want to sign this? >> yes. >> they look at aspiring entrepreneurs and from the beginning, give them support along the way. >> i bet you would like this. >> oh, yeah. >> thank you very much. >> congratulations. >> she helps startups on the ground level, loans of $500 and up to $35,000 alone with providing classes on management and finance. >> to take out $4,000 was -- man, i cried. i mean, me and lisa sat on the phone and cried about it. it was scary. but if it's a good idea, it's going to work. >> i created this organization -- dba -- doing business as miracle maids. we make miracles out of messes. >> for some of the rural poor isolate in the beautiful mountains of appalachia, small amounts of capital and large doses of education are the keys
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of establishing economic independence. >> they get encouraged by each other, they learn from each other. not just the money. >> for lisa and terri, this formula worked spectacularly well. >> man, it took off so fams. it got -- it was crazy. another. >> it can and generally does take years before a startup turns a profit. but there are other ways to measure the progress of the growing company. here are five ideas courtesy of number one, the presence of a well-rounded team. you should establish a balanced staff with connections in your industries. two, a working prototype. in the early stages, a prototype can be a big step toward securing investment. three, register property. a provisional patent or a domain name, you should take steps to protect your intellectual property, four, clearly define objectives and milestones. give your staff a chance to
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reach obtainable objections. number five, expert status. build reputation and your business by establishing yourself as an expert in the industry. time now to answer some of your business questions. erica and paul are back with us again. the first question is where to find funding. >> if i was to get a loan for $50,000, would i want that loan to come from a family member, a bank, or a vc. >> i can answer this one? i have sort of bad news to break to this questioner which is that, number one, a vc is probably not going to be a viable option. they're not in the business of making loans, particularly of that small amount. that's out. number two, generally if you're trying to get a loan from the bank, unfortunately most circumstances they're only willing to make the loan to you if you don't need the money. >> right. >> even if you have the setup where you can be an appropriate
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candidate for a bank loan, it will take more time and effort. if it's possible to get a loan from your family, that would be the fastest and most efficient way to go. the downside with that, you'll have a family member who wants to know about your business for a long time. >> makes it tricky sitting around the thanksgiving dinner table if business isn't doing well. the family member needs to know this is a business deal they're going into. instead of a loan, sell a piece of equity for $50,000 to a family member. there's no payback. >> that makes sense to you. at the same time in the early stage of the business, you don't want to necessarily sign an evaluation to your company for $50,000. so maybe having it be an equity convertible-type note gives your family member the option to convert it to equity or get the cash back. >> sounds good. this is a question from ernie. he writes, i i had some
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technical issues recently which only affected a small portion of my customers. should i address it with my website or -- you have some so you want to address it. so should you let everyone not having problems know that you have problems. >> honesty is the best policy. i think we know about that, i think honesty is the best policy. get it out there, get it out front. people are going to leave you if you have the problem and you're not addressing the problem. he could turn this to a positive. let's show you have integrity, honest, doing the right things to fix it. >> i agree honesty is the best policy. i agree with his hesitation which is you don't want to bring up problems with people not experiencing them. being an internet entrepreneur, he should know how to send out a newsletter to customers who aren't experiencing the problem. >> he doesn't know who they are.
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>> i thought they were contacting him about the problem, yeah. in that case, it's best to address the whole group. >> if you're going to address the whole group, there are ways to say it. be careful of how you word it. we want to let you know that every person counts and this is what you're doing. >> make it positive. >> we have a question from a bread maker. >> we have a business that has strong local brand recognition and are interested in trademarkitrademark ing our logo and name and so forth. not sure how to start it. >> you don't need to hire a lawyer necessarily to do this. the trek that you can do is take a look at the logos, the materials, and send it to the g mail account and it's archived, time, date stamped. if there's a issue of first use, he can go back to that. >> a lot of websites out there will do it for you for a
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relatively low fee. if you want to have a lawyer involved down the road to give you more specific advice, always get started asap using one of the simple routes. >> thank you so much for the advice. as you know, all of the questions came from our viewers. if anyone out there has a question, send us your questions and we'll get our experts to answer them. there all you have to do is it ask the show link. again the website is you can e-mail your questions or comments. your search engine optimization is a great way to enhance your business on-line. provides a variety of free web analytics and sco services. registered users can check out
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live stats of the website, analyze how people are finding their page, and checking the availability of domain names. offers a web stats application to provide realtime updates of your site's performance. to learn more about today's show, click on our website, it's all of today's segments and web exclusive content with more information to help you grow your business. next week, meet a former police officer who auctions off stolen stuff on line with the blessing of law enforcement. >> the same service we offer the three-man department as we offer the 35,000-man department. trucks come in, pick the items up, auction them up and send a check. >> eases a burden on police departments while offering a bargain to customers. until then, i'm j.j. ramberg. remember, we make your business our business.
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[trumpet playing "reveille" throughout] reviving the economy means reinventing the way we do business.

Your Business
MSNBC July 25, 2010 7:30am-8:00am EDT


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